A Critical Intervention Services (CIS) employee. After Michael Kenny’s 13-day stint, CIS has blocked him from working as a security in Florida ever since.
Photograph: Alamy Stock Photo

Michael Kenny’s 13-day stint at Critical Intervention Services (CIS), a Florida private security company, was short but consequential. The employment contract he signed with CIS in January 2017 has blocked him from working as a security guard in Florida ever since – but Kenny’s contract was hardly unique.

In fact, the countersuits that Kenny and CIS subsequently filed against each other illuminate an argument about workers’ rights that is raging nationwide.

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According to his lawsuit, after training several days with CIS, Kenny, 52, was assigned his first shift patrolling apartments in South St Petersburg from 7pm to 7am. A veteran and single father, Kenny says he couldn’t find childcare. When he sought a schedule change, Kenny claims CIS told him to work his assigned shift or resign. CIS lawyers deny the company told Kenny to resign and even offered to find a more accommodating assignment, but Kenny quit the $11.75-an-hour job.

The story might be expected to have ended there, but it didn’t. When Kenny began work at another security firm, CIS wrote to his new employer claiming that Kenny had signed a non-compete clause and thus had illegally taken proprietary information and specialized training with him. The new employer soon fired Kenny.

So Kenny filed a lawsuit against CIS, seeking over $15,000 in damages and a declaratory judgment that the non-compete clause he signed was unenforceable. CIS countersued for $50,000, and the case is headed for trial next year. Lawyers for CIS at the Solomon Law Group claim Kenny benefited from classroom and field training featuring the firm’s specialized security expertise – a legitimate business interest recognized by courts in other cases involving non-compete clauses. CIS lawyers also assert that Kenny “went to work, not only for a direct competitor, but for an existing CIS client”, and that he did not give CIS the opportunity to work with him on a possible waiver of the non-compete.

“This is about money and greed,” said Jonathan Pollard of Pollard PLLC, who is representing Kenny for free along with colleague Alexander Gil. “Companies use non-compete agreements to lock up talent, restrict employee mobility and suppress wages.”

White collar

Traditionally, non-compete clauses were found in contracts for senior employees who might have access to trade secrets or develop personal relationships to clients. Non-compete clauses help protect companies that fear employees will leave and take those assets to a competitor.

But when the recession receded, non-compete clauses started appearing in contracts for workers in low-wage jobs such as sandwich makers. They remain a roadblock for everyone from hair stylists to house cleaners. Their reach is difficult to determine because many workers don’t realize theyhave signed a non-compete clause. And though many courts are reluctant to enforce such agreements, few low-income workers have the resources to legally challenge them.

Full employment, economists predicted, would allow employees to shop around for better pay or working conditions. As workers flexed new bargaining muscle, wages would rise and conditions would improve because employers would face increasing pressure to find and keep talent – or so the theory went.

But though unemployment fell to 3.7% in September, that scenario hasn’t fully played out. One reason, research suggests, is that restrictive contract clauses have limited workers’ mobility and their ability to advocate for higher pay.

As a result, said David Seligman, an attorney and director of Towards Justice, a not-for-profit legal organization that brought cases against fast-food restaurants over anti-competitive hiring practices, “the market for low-wage workers is not free”. Instead, he argues, “there’s all kinds of impediments to worker mobility”.

State regulation?

Policymakers are starting to wrestle with these restrictions. In July, the Massachusetts attorney general, Maura Healey, and attorneys general from 10 other states requested information from eight fast-food chains about their use of no-poaching agreements, in which franchise owners agree not to hire workers from other locations within the same franchise. The attorneys general are currently reviewing the responses. Separately, Washington state attorney general Bob Ferguson reached legally binding agreements to stop including no-poach agreements in contracts with 30 franchises since July.

Non-compete clauses restricting workers from taking a job at a competitor immediately after leaving a job have proven more difficult to rein in. California, North Dakota and Oklahoma won’t enforce non-compete clauses, but they still show up in contracts, according to Matt Marx, an associate professor at the Boston University Questrom School of Business, potentially discouraging workers who aren’t aware of their rights.

Elsewhere, the situation remains murky.

When I saw this and started asking other people if they've seen it in their contracts I thought, 'Oh my gosh, this is something new'

Niki Cannady, a healthcare aide

Niki Cannady, 42, has worked as a healthcare aide since 1997 around Durham, North Carolina, and said she has only recently seen non-compete clauses in contracts for healthcare agencies. “I’m old school,” Cannady said, “so when I saw this and started asking other people if they’ve seen it in their contracts I thought, ‘Oh my gosh, this is something new.’”

Non-compete clauses have now become common in healthcare, where employees often develop personal relationships with clients that employers argue could give competitors an unfair advantage when the worker changes jobs.

Cannady has been wary of non-compete agreements since signing one with a former employer, healthcare staffing agency Allcare Home Health. Cannady wanted to switch agencies to follow a client, but says Allcare threatened to sue her for $4,000. Allcare did not respond to requests for comment.

The client wrote a letter of support to Allcare and the company eventually backed off, allowing Cannady to switch agencies.

In 2016, the US Department of the Treasury and the White House issued reports on such contracts that found approximately one in five American workers have signed a non-compete agreement.

According to the Treasury report, non-compete clauses “can protect trade secrets, reduce labor turnover, impose costs on competing firms, and improve employer leverage in future negotiations with workers”. But the report indicated that some practices, like non-compete clauses in contracts for low-wage workers, or non-compete clauses workers aren’t aware of when signing a contract, are detrimental.

The Obama administration issued a subsequent call to action later that year, encouraging states to curb abuse of non-compete clauses by passing legislation to ban them for certain classes of workers, or require more transparency.

Massachusetts included non-compete reform as part of an economic development package signed by Governor Charlie Baker in August. The new policy bans non-compete clauses for hourly workers and establishes restrictions, including a stipulation that non-compete clauses must be presented before an employee’s first day on the job and can’t cover more than a year after employment. The new law allows non-compete agreements for other workers if they are limited to 12 months after employment, and are necessary to protect legitimate business interests.

Getting there took almost 10 years of work in Massachusetts. Proposals emerged in 2009 from Representative Lori Ehrlich and one from Will Brownsberger, at the time a Massachusetts house representative and now a state senator, that went so far as to ban enforcement of non-compete clauses altogether.

But trade groups like the Associated Industries of Massachusetts (Aim), the International Franchise Association, and large employers like MassMutual and Verizon vigorously lobbied against broad bans on non-compete clauses.

Legislation banning non-compete clauses for workers making under $15 an hour passed the Maryland house of representatives in 2017 with bipartisan support, but momentum faded in the state senate when its Republican sponsor John Astle withdrew from sponsorship. The Allegis Group, a Maryland-based staffing company, the Maryland Association of CPAs, Maryland chamber of commerce and the Maryland Association for Commercial Real Estate had previously written to lawmakers urging them not to pass a 2015 bill banning non-competes altogether.

Republican delegate Kevin Hornberger, who co-sponsored the 2015 and 2017 measure, said he is working with Democrat Alfred Carr to introduce legislation again.

Other governmental bodies that introduced legislation have gotten less traction, including the New York city council, where Democratic Councilman Rory Lancman introduced a bill last year to regulate the use of non-compete agreements for low-wage workers.

“The fast food industry … has been animated over the past few years” over the issue of non-compete and no-poaching agreements, Lancman said. His bill has yet to pass the committee on civil service and labor, but he vows to press on.

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Federal scrutiny

The International Franchise Association (IFA) has reported lobbying on the legislation. “Many franchise systems invest in methods of training and operation – and they spend considerable time and expense conveying training and operational processes to various groups of employees,” the IFA said in a June letter to Congress. The letter offers to work with legislators to craft a compromise solution.

For now, non-compete clauses will likely continue to bind workers in fields like in-home healthcare – and worker advocates will continue to fight them. “In my experience,” said National Domestic Workers Alliance attorney and state policy director Rocío Avila, “those clauses … serve as a tool to intimidate and scare people off”.